What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-05 · 176 added, 296 removed, 366 unchanged (56% of the section changed)

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elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2024.

Unless the context indicates otherwise, references in this management’s discussion and analysis to “we,” “our,” and “us,” refer to Bank7

and its consolidated subsidiaries.

Unless the context indicates otherwise, references in this management’s discussion and analysis to “we,” “our,” and “us,” refer to Bank7 Corp.

consolidated subsidiaries.

All references to “the Bank” refer to Bank7, our wholly owned subsidiary.

We are Bank7 Corp., a bank holding company headquartered in Oklahoma City, Oklahoma.

Through our wholly-owned subsidiary, Bank7, we operate twelve locations in Oklahoma, the Dallas/Fort Worth, Texas metropolitan

area and Kansas.

Through our wholly-owned subsidiary, Bank7, we operate twelve locations in Oklahoma, the Dallas/Fort Worth, Texas metropolitan area

We are focused on serving business owners and entrepreneurs by delivering fast, consistent and well-designed loan and deposit products to meet their financing needs.

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As a bank holding company, we generate most of our revenue from interest income on loans and from short-term investments.

The primary source of funding for

our loans and short-term investments are deposits held by our subsidiary, Bank7.

We measure our performance by our return on average equity, earnings per share, capital ratios, efficiency ratio (calculated by dividing noninterest expense by the

sum of net interest income on a tax equivalent basis) and noninterest income.

The primary source of funding for our loans and short-term investments are deposits held by

our subsidiary, Bank7.

We measure our performance by our return on average equity, earnings per share, capital ratios, efficiency ratio (calculated by dividing noninterest expense by the sum of net interest income on a tax equivalent basis) and

noninterest income.

Q1 2025 Overview

We reported total loans of $1.44 billion as of September 30, 2024, an increase of $44.8 million, or 3.2%, from September 30, 2023.

Total deposits were $1.52 billion as of September 30, 2024, a decrease of $69.4

million, or 4.4%, as compared to September 30, 2023.

Pre-tax net income was $15.5 million, an increase of $5.3 million, or 51.9%, for the three months ended September 30, 2024 as compared to pre-tax net income of $10.2 million for the same period in 2023.

net income was $45.6 million, an increase of $10.0 million, or 28.0%, for the nine months ended September 30, 2024 as compared to pre-tax net income of $35.7 million for the same period in 2023.

Return on average assets and return on average equity was 2.73% and 23.67%, respectively for the three months ended September 30, 2024, as compared to 1.82% and 18.89%, respectively, for the same period in 2023.

Return on average assets and return on average equity was 2.68% and 24.79%, respectively for the nine months ended September 30, 2024, as compared to 2.19% and 23.29%, respectively, for the same period in 2023.

Our efficiency ratio for the three

months ended September 30, 2024 was 37.87% as compared to 33.61% for the same period in 2023.

Our efficiency ratio for the nine months ended September 30, 2024 was 37.58% as compared to 35.05% for the same period in 2023.

The provision for credit losses for the three months ended September 30, 2024 decreased $4.2 million, or 100.0%, as compared to the same period in 2023.

The provision for credit losses for the nine months ended

September 30, 2024 decreased $5.6 million or 100.0%, as compared to the same period in 2023.

The provision expense for the nine months ended September 30, 2023 was related to loan growth in the first quarter of 2023, the impact of updated

economic assumptions, and we had a single loan customer that filed for bankruptcy, and as a result, we recorded an additional allowance for credit losses of $3.0 million.

We reported total loans of $1.42 billion as of March 31, 2025, an increase of $49.9 million, or 3.6%, from March 31, 2024.

Total deposits were $1.55 billion as of March 31, 2025, a decrease of $28.9 million, or 1.8%,

as compared to March 31, 2024.

Pre-tax net income was $13.7 million, a decrease of $1.2 million, or 7.9%, for the three months ended March 31, 2025 as compared to pre-tax net income of $14.9 million for the same period in 2024.

Return on average assets and return on average equity was 3.20% and 25.47%, respectively for the three months ended March 31, 2025, as compared to 3.40% and 33.97%, respectively, for the same period in 2024.

efficiency ratio for the three months ended March 31, 2025 was 39.45% as compared to 38.29% for the same period in 2024.

Results of Operations

Three Months Ended September 30, 2024 and September 30, 2023

Three Months Ended March 31, 2025 and March 31, 2024

Net Interest Income and Net Interest Margin.

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Net Interest Margin

For the Three Months Ended September 30,

(Dollars in thousands)

Interest-Earning Assets:

Short-term investments

Debt securities, taxable

Debt securities, tax exempt (1)

Loans held for sale

Total loans (2)

Total interest-earning assets

Noninterest-earning assets

Funding sources:

Interest-bearing liabilities:

Transaction accounts

Time deposits

Total interest-bearing deposits

Total interest-bearing liabilities

Noninterest-bearing liabilities:

Noninterest-bearing deposits

Other noninterest-bearing liabilities

Total noninterest-bearing liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest income

Net interest spread

Net interest margin

Taxable-equivalent yield of 2.13% as of September 30, 2024, applying a 24.0% effective tax rate

Average loan balances include monthly average nonaccrual loans of $7.4 million and $41.2 million as of September 30, 2024 and September 30, 2023, respectively, are included in loans.

For the third quarter of 2024 compared to the third quarter of 2023:

Interest income on total loans totaled $30.8 million, an increase of $1.9 million or 6.6%, due to an increase in average loans of $74.5 million, or 5.5%, and increased loan yields as discussed below;

Yields on our interest-earning assets totaled 7.92%, an increase of 48 basis points which was attributable to higher loan yields of 9 basis points, an increase in yield on short term investments of 18 basis points, and an increase in

yield on taxable debt securities of 52 basis points;

Net interest margin for the third quarter of 2024 was 5.02% compared to 4.87% for the third quarter of 2023.

Net Interest Margin

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(Dollars in thousands)

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Net interest margin

Taxable-equivalent yield of 2.15% as of September 30, 2024, applying a 24.2% effective tax rate

Average loan balances include monthly average nonaccrual loans of $13.9 million and $41.2 million as of September 30, 2024 and September 30, 2023, respectively, are included in loans.

For the first nine months of 2024 compared to the same period in 2023:

Interest income on total loans totaled $89.8 million, an increase of $8.7 million or 10.7%, due to an increase in average loans of $81.4 million, or 6.3%, and increased loan yields as discussed below;

Yields on our interest-earning assets totaled 7.85%, an increase of 56 basis points which was attributable to higher loan yields of 32 basis points, an increase in yield on short term investments of 42 basis points, and an increase in

yield on taxable debt securities of 108 basis points;

Net interest margin for the first nine months of 2024 was 5.10% compared to 5.01% for the same period in 2023.

Cost of total interest-bearing deposits totaled 4.10%, an increase of 62 basis points which was attributable to higher interest rates on transaction accounts of 58 basis points and higher interest rates on time deposits accounts of 79

basis points.

Increases and decreases in interest income and interest expense result from changes in average balances, or volume, of interest-earning assets and interest-bearing liabilities, as well as changes in average

interest rates.

Taxable-equivalent yield of 2.71% as of March 31, 2025, applying a 24.6% effective tax rate

Average loan balances include monthly average nonaccrual loans of $6.7 million and $22.5 million as of March 31, 2025 and March 31, 2024, respectively, are included in loans.

For the first quarter of 2025 compared to the first quarter of 2024:

Interest income on total loans totaled $27.3 million, a decrease of $2.8 million or 9.3%, due to decreased loan yields as discussed below;

Yields on our interest-earning assets totaled 7.27%, a decrease of 50 basis points which was primarily attributable to lower loan yields of 90 basis points, and a decrease in yield on taxable debt securities of 28 basis points;

Net interest margin for the first quarter of 2025 was 4.98% compared to 5.14% for the first quarter of 2024.

The following tables set forth the effects of changing rates and volumes on our net interest income during the period shown.

Information is provided with respect to (i) effects on interest income attributable to changes in volume

(change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume).

Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in

volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume).

Analysis of Changes in Interest Income and Expenses

For the Three Months Ended

September 30, 2024 vs 2023

Change due to:

(Dollars in thousands)

Increase (decrease) in interest income:

Short-term investments

Debt securities

Total increase (decrease) in interest income

Increase (decrease) in interest expense:

Transaction accounts

Time deposits

Total interest-bearing deposits

Total increase (decrease) in interest expense

Increase (Decrease) in net interest income

Analysis of Changes in Interest Income and Expenses

For the Nine Months Ended

September 30, 2024 vs 2023

March 31, 2025 vs 2024

Change due to:

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Our investment portfolio consists entirely of securities classified as available-for-sale.

As a result, the carrying values of our investment securities are adjusted for unrealized gain or loss, and any gain or

loss is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity.

As a result, the carrying values of our investment securities are adjusted for unrealized gain or loss, and any gain or loss

is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity.

We evaluate our available-for-sale securities portfolio on a quarterly basis for potential credit-related losses.

We assess potential credit losses by comparing the fair value of a debt security to its amortized

We assess potential credit losses by comparing the fair value of a debt security to its amortized cost

If the fair value of a debt security is greater than the amortized cost basis, no allowance for credit losses is recognized.

If the fair value is less than the amortized cost basis, we review the factors to determine if the

impairment is credit-related or noncredit-related.

For debt securities we intend to sell or are more likely than not required to sell, before the recovery of their amortized cost basis, the difference between fair value and amortized cost is

impaired and is recognized through earnings.

For debt securities we do not intend to sell or are more likely than not required to sell, prior to expected recovery of amortized cost basis, the credit portion of the impairment is recognized through

earnings, with a corresponding entry to an allowance for credit losses, and the noncredit portion is recognized through accumulated other comprehensive income.

The following table summarizes the maturity distribution schedule with corresponding weighted average taxable equivalent yields of the debt securities portfolio at

September 30, 2024.

If the fair value is less than the amortized cost basis, we review the factors to determine if the impairment is

credit-related or noncredit-related.

For debt securities we intend to sell or are more likely than not required to sell, before the recovery of their amortized cost basis, the difference between fair value and amortized cost is impaired and is

recognized through earnings.

corresponding entry to an allowance for credit losses, and the noncredit portion is recognized through accumulated other comprehensive income.

The following table summarizes the maturity distribution schedule with corresponding weighted average taxable equivalent yields of the debt securities portfolio at March 31,

The following table presents securities at their expected maturities, which may differ from contractual maturities.

The Company manages its debt securities portfolio for liquidity, as a tool to execute its asset/liability

management strategy, and for pledging requirements for public funds:

As of September 30, 2024

The Company manages its debt securities portfolio for liquidity, as a tool to execute its asset/liability management strategy,

and for pledging requirements for public funds:

As of March 31, 2025

After One Year But

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Percentage of total

*Yield is on taxable-equivalent basis using 21% tax rate

* Yield is on a taxable-equivalent basis using 21% tax rate

Provision for Credit Losses

Credit risk is inherent in the business of making loans.

We establish an Allowance for credit losses (“Allowance”) through charges to earnings, which are shown in the statements of comprehensive

income as the provision for credit losses.

The provision for credit losses and level of Allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio,

delinquencies, management’s assessment of the quality of the loan portfolio, and the valuation of problems and the general economic conditions in our market areas.

For the three months ended September 30, 2024 compared to the three months ended September 30, 2023:

The provision for credit losses decreased from $4.2 million to $0;

The allowance as a percentage of gross loans decreased by 24 basis points to 1.24%.

For the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023:

The provision for credit losses decreased from $5.6 million to $0;

The allowance as a percentage of gross loans decreased by 24 basis points to 1.24%.

We establish an Allowance for credit losses (“Allowance”) through charges to earnings, which are shown in the statements of comprehensive income as the

provision for credit losses.

The provision for credit losses and level of Allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies,

management’s assessment of the quality of the loan portfolio, and the valuation of problems and the general economic conditions in our market areas.

For the three months ended March 31, 2025 compared to the three months ended March 31, 2024:

There was no provision for credit losses;

The allowance as a percentage of total loans decreased by 15 basis points to 1.28%.

Noninterest Income

The following table sets forth the major components of our noninterest income for the three months ended September 30, 2024 and 2023:

The following table sets forth the major components of our noninterest income for the three months ended March 31, 2025 and 2024:

For the Three Months Ended

September 30,

(Dollars in thousands)

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Mortgage lending income

Loss on sales of available-for-sale debt securities

Service charges on deposit accounts

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Total noninterest income

Noninterest income for the three months ended September 30, 2024 was $3.7 million compared to $1.0 million for the same period in 2023, an increase of $2.7 million, or 265.1%.

The increase was primarily

attributable to income related to the operation of oil and gas assets acquired during the fourth quarter of 2023, see Note 2 of the financial statements.

The following table sets forth the major components of our noninterest income for the nine months ended September 30, 2024 and 2023:

For the Nine Months Ended

September 30,

(Dollars in thousands)

Noninterest income:

Mortgage lending income

Loss on sales of available-for-sale debt securities

Service charges on deposit accounts

Other income and fees

Total noninterest income

Noninterest income for the nine months ended September 30, 2024 was $8.9 million compared to $2.5 million for the same period in 2023, an increase of $6.4 million, or 258.1%.

The increase was primarily attributable

to income related to the operation of oil and gas assets acquired during the fourth quarter of 2023, see Note 2 of the financial statements.

Noninterest income for the three months ended March 31, 2025 was $1.8 million compared to $2.0 million for the same period in 2024, a decrease of $251,000, or 12.5%.

Noninterest Expense

The following table sets forth the major components of our noninterest expense for the three months ended September 30, 2024 and 2023:

The following table sets forth the major components of our noninterest expense for the three months ended March 31, 2025 and 2024.

For the Three Months Ended

September 30,

(Dollars in thousands)

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Total noninterest expense

Noninterest expense for the three months ended September 30, 2024 was $9.4 million compared to $7.4 million for the same period in 2023, an increase of $2.0 million, or 27.2%.

The increase was primarily

attributable to expense related to the operation of oil and gas assets acquired during the fourth quarter of 2023, see Note 2 of the financial statements.

The following table sets forth the major components of our noninterest expense for the nine months ended September 30, 2024 and 2023:

For the Nine Months Ended

September 30,

(Dollars in thousands)

Noninterest expense:

Salaries and employee benefits

Furniture and equipment

Data and item processing

Accounting, marketing, and legal fees

Regulatory assessments

Advertising and public relations

Travel, lodging and entertainment

Other expense

Total noninterest expense

Noninterest expense for the nine months ended September 30, 2024 was $27.7 million compared to $22.4 million for the same period in 2023, an increase of $5.3 million, or 23.5%.

The increase was primarily

attributable to expense related to the operation of oil and gas assets acquired during the fourth quarter of 2023, see Note 2 of the financial statements.

Noninterest expense for the three months ended March 31, 2025 was $8.9 million compared to $9.1 million for the same period in 2024, a decrease of $253,000, or 2.8%.

Financial Condition

The following discussion of our financial condition compares September 30, 2024 and December 31, 2023.

Total assets decreased $31.2 million, or 1.8%, to $1.74 billion as of September 30, 2024, compared to $1.77 billion as of December 31, 2023.

The following discussion of our financial condition compares March 31, 2025 and December 31, 2024.

Total assets increased $45.7 million, or 2.6%, to $1.79 billion as of March 31, 2025, compared to $1.74 billion as of December 31, 2024.

Loan Portfolio

The following table presents the balance and associated percentage of each major category in our loan portfolio as of September 30, 2024 and December 31, 2023:

As of September 30,

The following table presents the balance and associated percentage of each major category in our loan portfolio as of March 31, 2025 and December 31, 2024:

As of March 31,

As of December 31,

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Our loans represent the largest portion of our earning assets.

The quality and diversification of the loan portfolio is an important consideration when reviewing our

financial condition.

As of September 30, 2024, and December 31, 2023, our gross loans were $1.44 billion and $1.36 billion, respectively.

The quality and diversification of the loan portfolio is an important consideration when reviewing our financial

As of March 31, 2025, and December 31, 2024, our gross loans were $1.43 billion and $1.40 billion, respectively.

We have established internal concentration limits in the loan portfolio for Commercial Real Estate (CRE) loans, hospitality loans, energy loans, and construction loans, among others.

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established limits.

We use underwriting guidelines to assess each borrower’s historical cash flow to determine debt service capabilities, and we further stress test the customer’s debt service capability under higher interest rate scenarios as

well as other underlying macro-economic factors.

as other underlying macro-economic factors.

Financial and performance covenants are used in commercial lending to allow us to react to a borrower’s deteriorating financial condition, should that occur.

The following tables show the contractual maturities of our gross loans as of the periods below:

As of September 30, 2024

As of March 31, 2025

Due after One Year

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Commercial & industrial

Allowance for Credit and Lease Losses

Allowance for Credit Losses

The allowance is based on management’s estimate of potential losses inherent in the loan portfolio.

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While management uses available information to analyze losses on loans, future additions to the allowance may be necessary based on changes in economic conditions.

In addition, various regulatory agencies, as an integral part

of their examination process, periodically review the Company’s allowance.

In analyzing the adequacy of the allowance, a comprehensive loan grading system to determine risk potential in loans is utilized together with the results of internal

credit reviews.

In addition, various regulatory agencies, as an integral part of

their examination process, periodically review the Company’s allowance.

In analyzing the adequacy of the allowance, a comprehensive loan grading system to determine risk potential in loans is utilized together with the results of internal credit

To determine the adequacy of the allowance, the loan portfolio is broken into segments based on loan type.

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of bankruptcies, criticized and classified loan trends, expected losses on real estate secured loans, new credit products and policies, economic conditions, concentrations of credit risk and the experience and abilities of our lending personnel.

The allowance was $17.9 million at September 30, 2024, compared to $19.7 million at December 31, 2023.

The allowance was $18.2 million at March 31, 2025, compared to $17.9 million at December 31, 2024.

The following table provides an analysis of the activity in our allowance for the periods indicated:

For the Nine Months Ended

September 30,

For the Three Months Ended

(Dollars in thousands)

Balance at beginning of the period

Impact of CECL adoption

Provision for credit losses for loans

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category, for the periods indicated:

As of September 30,

As of March 31,

As of December 31,

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only to the extent that cash is received and the loan’s principal balance is deemed collectible.

Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is

Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable.

Loans are evaluated for expected credit losses over their contractual term, reflecting management’s current estimate.

Loans placed on nonaccrual status and loan modifications

granted to borrowers experiencing financial difficulty are considered to have elevated credit risk and are carefully considered within our current expected credit loss methodology.

Income from loans placed on nonaccrual status continues to be

recognized to the extent cash is received and when the collectability of the loan’s principal balance is reasonably assured.

Depending on a particular loan’s risk characteristics, we estimate expected credit losses using methods such as present

value of expected future cash flows discounted at the loan’s effective interest rate, observable market prices for similar assets if available, or the fair value of collateral less estimated costs to sell for collateral-dependent loans.

considered collateral-dependent when the expected source of repayment is primarily the liquidation of the collateral.

Fair value, where utilized, is determined by independent appraisals, typically on an annual basis.

Between appraisal periods, the

estimated fair value may be adjusted based on specific events, such as identified deterioration of collateral quality through our credit risk monitoring, or discussions with the borrower indicating the appraised value may no longer reflect current

market conditions.

The estimated credit losses are recognized as an allowance for credit losses, which is a valuation account.

Changes in the allowance for credit losses, whether increases or decreases, are recorded in current period earnings as

provision for credit losses.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned, or OREO, until sold, and is initially recorded at fair value less costs to sell when

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The following table presents information regarding nonperforming assets as of the dates indicated.

September 30, 2024

December 31, 2024

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Ratio of nonperforming assets to total assets

Included in the nonaccrual loans balance are $0 and $10.12 million of loans modified to borrows experiencing financial difficulty as of September 30, 2024 and December 31, 2023, respectively.

See Note 6 of the financial statements.

(1) There are no loans modified to borrowers experiencing financial difficulty included in nonaccrual loans as of March 31, 2025 and December 31, 2024, respectively.

The following tables present an aging analysis of loans as of the dates indicated.

As of September 30, 2024

Loans 30-59 days past due

Loans 60-89 days past due

Loans 90+ days past due

Loans 90+ days past due and accruing

Total past due loans

As of March 31, 2025

Loans 30-59 days past

Loans 60-89 days past

Total past due

(Dollars in thousands)

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As of December 31, 2024

Loans 30-59 days past due

Loans 60-89 days past due

Loans 90+ days past due

Loans 90+ days past due and accruing

Total Past Due Loans

Loans 30-59 days past

Loans 60-89 days past

(Dollars in thousands)

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These loans generally conform to Bank policies, are characterized by policy-conforming advance rates on collateral, and have well-defined repayment sources.

addition, these credits are extended to borrowers and guarantors with a strong balance sheet and either substantial liquidity or a reliable income history.

these credits are extended to borrowers and guarantors with a strong balance sheet and either substantial liquidity or a reliable income history.

These loans are still considered “Pass” credits;

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These loans have observable weaknesses or evidence of imprudent handling or structural issues.

The weaknesses require close attention, and the remediation

of those weaknesses is necessary.

The weaknesses require close attention, and the remediation of

those weaknesses is necessary.

No risk of probable loss exists.

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These loans are not adequately protected by the sound worth and debt service capacity of the borrower, but may be well-secured.

The loans have defined

weaknesses relative to cash flow, collateral, financial condition or other factors that might jeopardize repayment of all of the principal and interest on a timely basis.

There is the possibility that a future loss will occur if weaknesses are

not remediated.

The loans have defined weaknesses

relative to cash flow, collateral, financial condition or other factors that might jeopardize repayment of all of the principal and interest on a timely basis.

There is the possibility that a future loss will occur if weaknesses are not remediated.

Outstanding loan balances categorized by internal risk grades as of the periods indicated are summarized as follows:

As of September 30, 2024

As of March 31, 2025

(Dollars in thousands)

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We gather deposits primarily through our twelve branch locations and online through our website.

We offer a variety of deposit products including demand deposit accounts and interest-bearing products, such as

savings accounts and certificates of deposit.

We put continued effort into gathering noninterest-bearing demand deposit accounts through loan production cross-selling, customer referrals, marketing efforts and various involvement with community

We offer a variety of deposit products including demand deposit accounts and interest-bearing products, such as savings

accounts and certificates of deposit.

We put continued effort into gathering noninterest-bearing demand deposit accounts through loan production cross-selling, customer referrals, marketing efforts and various involvement with community networks.

Some of our interest-bearing deposits are obtained through brokered transactions.

We participate in the CDARS and ICS programs, where customer funds are placed into multiple deposit accounts, each in an amount under the standard FDIC

insurance maximum of $250,000, and placed at a network of banks across the United States.

Total deposits as of September 30, 2024 and December 31, 2023 were $1.52 billion and $1.59 billion, respectively.

We participate in the CDARS and ICS programs, where customer funds are placed into multiple deposit accounts, each in an amount under the standard FDIC insurance

maximum of $250,000, and placed at a network of banks across the United States.

Total deposits as of March 31, 2025 and December 31, 2024 were $1.55 billion and $1.52 billion, respectively.

As of March 31, 2025, and December 31, 2024, brokered deposits were $334.2 million and $336.7 million, respectively.

Uninsured deposits are defined as the portion of deposit accounts in U.S.

offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as

deposits and are not subject to any federal or state deposit insurance regimes.

Total uninsured deposits were $344.6 million and $448.7 million at September 30, 2024 and December 31, 2023, respectively, as calculated per regulatory guidance.

was approximately 22.6% and 28.2% of deposits at September 30, 2024 and December 31, 2023, respectively.

offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits

and are not subject to any federal or state deposit insurance regimes.

Total uninsured deposits were $377.9 million and $354.2 million at March 31, 2025 and December 31, 2024, respectively, as calculated per regulatory guidance.

These amounts were

approximately 24.4% and 23.4% of deposits at March 31, 2025 and December 31, 2024, respectively.

The following table sets forth deposit balances by certain categories as of the dates indicated and the percentage of each deposit category to total deposits.

As of September 30,

As of March 31,

As of December 31,

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The following tables set forth the maturity of time deposits as of the dates indicated below:

As of September 30, 2024 Maturity Within:

As of March 31, 2025 Maturity Within:

Three to Six Months

Six to 12 Months

After 12 Months

(Dollars in thousands)

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Three to Six Months

Six to 12 Months

After 12 Months

(Dollars in thousands)

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Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost.

We continuously monitor our

liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements.

We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an

appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

We continuously monitor our liquidity

position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements.

We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate

balance between assets and liabilities to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by the management of liquid assets and access to alternative sources of funds.

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funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.

As of September 30, 2024, we had no unsecured fed funds lines with correspondent depository institutions, with no corresponding amounts advanced.

In addition, based on the values of loans pledged as collateral, we had borrowing availability

with the FHLB of $192.0 million as of September 30, 2024 and $159.2 million as of December 31, 2023, and we had access to approximately $367.7 million in liquidity with the Federal Reserve Bank as of September 30, 2024 and $0 as of December 31,

As of March 31, 2025, we had no unsecured fed funds lines with correspondent depository institutions, with no corresponding amounts advanced.

In addition, based on the values of loans pledged as collateral, we had borrowing availability with the

FHLB of $206.8 million as of March 31, 2025 and $190.9 million as of December 31, 2024, and we had access to approximately $296.7 million in liquidity with the Federal Reserve Bank as of March 31, 2025 and $336.1 million as of December 31, 2024.

Capital Requirements

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capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies.

The capital amounts and classifications are subject to qualitative judgments

by the federal banking regulators about components, risk weightings and other factors.

The capital amounts and classifications are subject to qualitative judgments by

the federal banking regulators about components, risk weightings and other factors.

Qualitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios of Common Equity Tier 1 (“CET1”)

capital, Tier 1 capital, total capital to risk-weighted assets, and Tier 1 capital to average consolidated assets, referred to as the “leverage ratio.”

As of September 30, 2024, the Bank was in compliance with all applicable regulatory requirements and categorized as “well-capitalized” under the prompt corrective action frame work.

been no conditions or events since September 30, 2024 that management believes would change this classification.

The table below presents our applicable capital requirements, as well as our capital ratios as of September 30, 2024 and December 31,

The Company exceeded all regulatory capital requirements and the Bank was considered to be “well-capitalized” as of the dates reflected in the tables below.

As of March 31, 2025, the Bank was in compliance with all applicable regulatory requirements and categorized as “well-capitalized” under the prompt corrective action frame work.

There have been

no conditions or events since March 31, 2025 that management believes would change this classification.

The table below presents our applicable capital requirements, as well as our capital ratios as of March 31, 2025 and December 31, 2024.

Company exceeded all regulatory capital requirements and the Bank was considered to be “well-capitalized” as of the dates reflected in the tables below.

Basel III Capital Rules

Under the Basel III Capital Rules, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking

organization must hold a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements.

As of September 30, 2024, the Company and the Bank met all capital adequacy requirements under the Basel III Capital

Under the Basel III Capital Rules, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold

a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements.

As of March 31, 2025, the Company and the Bank met all capital adequacy requirements under the Basel III Capital Rules.

Conservation Buffer

Minimum to be "Well-

Capitalized” Under Prompt

Corrective Action

Capitalized" Under Prompt Corrective Action

(Dollars in thousands)

As of September 30, 2024

As of March 31, 2025

Total capital (to risk-weighted assets)

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Minimum to be "Well-

Capitalized” Under Prompt

Corrective Action

Capitalized" Under Prompt Corrective Action

(Dollars in thousands)

5 unchanged sentences

Shareholders’ equity provides a source of permanent funding, allows for future growth and provides a cushion to withstand unforeseen adverse developments.

Total shareholders’ equity increased

$33.8 million as of September 30, 2024 to $204.2 million, compared to $170.3 million as of December 31, 2023.

Total shareholders’ equity increased $8.4 million as of March

31, 2025 to $221.7 million, compared to $213.2 million as of December 31, 2024.

Contractual Obligations

The following tables contain supplemental information regarding our total contractual obligations as of September 30, 2024, and December 31, 2023:

Payments Due as of September 30, 2024

The following tables contain supplemental information regarding our total contractual obligations as of March 31, 2025, and December 31, 2024:

Payments Due as of March 31, 2025

Within One Year

1 unchanged sentence

Three to Five Years

After Five Years

(Dollars in thousands)

7 unchanged sentences

Three to Five Years

After Five Years

(Dollars in thousands)

9 unchanged sentences

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers.

These financial instruments include commitments to extend credit

and standby letters of credit.

These financial instruments include commitments to extend credit and

standby letters of credit.

Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.

1 unchanged sentence

reflect the extent of involvement we have in particular classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Commitments generally have fixed expiration dates or other

termination clauses and may require payment of a fee.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

We evaluate each customer’s

creditworthiness on a case-by-case basis.

The amount of collateral obtained, if we deemed necessary upon extension of credit, is based on management’s credit evaluation of the counterparty.

The Company also estimates a reserve for potential

losses associated with off-balance sheet commitments and letters of credit.

It is included in other liabilities in the Company’s consolidated statements of condition, with any related provisions to the reserve included in non-interest expense in

the consolidated statement of income.

In determining the reserve for unfunded lending commitments, a process similar to the one used for the allowance is employed.

Based on historical experience, loss factors, adjusted for expected funding, are applied

to the Company’s off-balance sheet commitments and letters of credit to estimate the potential for losses.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of the customer to a third party.

They are intended to be disbursed, subject to certain conditions, upon

request of the borrower.

To control this credit risk, the Company uses the same underwriting standards as it uses for loans recorded on the balance sheet.

Loan commitments are agreements to lend to a customer, as long as there is no violation of any condition established in the contract.

Standby letters of credit are conditional commitments issued by the Bank to

guarantee the performance of the customer to a third party.

They are intended to be disbursed, subject to certain conditions, upon request of the borrower.

The following table summarizes commitments as of the dates presented.

September 30,

December 31, 2024

(Dollars in thousands)

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These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes.

These estimates, assumptions and judgments are based on

information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement.

In particular, management has

identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

These estimates, assumptions and judgments are based on information

available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement.

In particular, management has identified several

accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

The following is a discussion of the critical accounting policies and significant estimates that we believe require us to make the most complex or subjective decisions or assessments.

5 unchanged sentences

addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance.

In analyzing the adequacy of the allowance, a comprehensive loan grading system to determine risk potential in

loans is utilized together with the results of internal credit reviews.

In analyzing the adequacy of the allowance, a comprehensive loan grading system to determine risk potential in loans

is utilized together with the results of internal credit reviews.

To determine the adequacy of the allowance, the loan portfolio is broken into pools based on loan type and risk characteristics.

3 unchanged sentences

Other considerations include volumes and trends of delinquencies,

nonaccrual loans, levels of bankruptcies, criticized and classified loan trends, expected losses on real estate secured loans, new credit products and policies, economic conditions, concentrations of credit risk and the experience and abilities

of our lending personnel.

In addition to the pool evaluations, classified loans with a balance of $250,000 or more are individually evaluated based on facts and circumstances of the loan to determine if a specific allowance amount may be

Specific allowances may also be established for loans whose outstanding balances are below the $250,000 threshold when it is determined that the risk associated with the loan differs significantly from the risk factor amounts

established for its loan pool.

our lending personnel.

Goodwill and Intangibles

Intangible assets totaled $907,000 and goodwill, net of accumulated amortization, totaled $8.5 million as of September 30, 2024, compared to intangible assets of $1.0 million and goodwill of $8.5

million as of December 31, 2023.

Goodwill resulting from a business combination represents the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of

the acquisition date.

Intangible assets totaled $846,000 and goodwill, net of accumulated amortization, totaled $11.2 million as of March 31, 2025, compared to intangible assets of $878,000 and goodwill of $8.5 million as of December 31,

Goodwill resulting from a business combination represents the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition

Goodwill is tested annually for impairment or more frequently if other impairment indicators are present.

If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and

goodwill is written down to its implied fair value.

If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written

down to its implied fair value.

Subsequent increases in goodwill value are not recognized in the accompanying consolidated financial statements.

Other intangible assets consist of core deposit intangible assets and are amortized on a straight-line basis based on an estimated useful life of 10 years.

Such assets are periodically evaluated as

to the recoverability of their carrying values.

Such assets are periodically evaluated as to the

recoverability of their carrying values.

We file a consolidated income tax return.

9 unchanged sentences

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement, defines fair value as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market

participants at the measurement date.

at the measurement date.

The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters.

For financial

instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value.

When observable market prices and parameters are not available, management judgment is

necessary to estimate fair value.

For financial instruments that

trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value.

When observable market prices and parameters are not available, management judgment is necessary to

estimate fair value.

In addition, changes in market conditions may reduce the availability of quoted prices or the observable date.

Debt securities that are being held for indefinite periods of time and are not intended to sell, are

classified as available for sale and are stated at estimated fair value.

Unrealized gains or losses on debt securities available for sale are reported as a component of stockholders’ equity and comprehensive income, net of income tax.

Debt securities that are being held for indefinite periods of time and are not intended to sell, are classified as available for sale and are stated at estimated fair value.

Unrealized gains or losses on debt

securities available for sale are reported as a component of stockholders’ equity and comprehensive income, net of income tax.

The Company reviews its portfolio of debt securities in an unrealized loss position at least quarterly.

The Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be required

to sell, the securities before recovery of the amortized cost basis.

The Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be required to

sell, the securities before recovery of the amortized cost basis.

If either of these criteria is met, the securities amortized cost basis is written down to fair value as a current period expense.

If either of the above criteria is not met,

the Company evaluates whether the decline in fair value is the result of credit losses or other factors.

In making this assessment, the Company considers, among other things, the period of time the security has been in an unrealized loss

position, and performance of any underlying collateral and adverse conditions specifically related to the security.

If either of the above criteria is not met, the

Company evaluates whether the decline in fair value is the result of credit losses or other factors.

In making this assessment, the Company considers, among other things, the period of time the security has been in an unrealized loss position, and

performance of any underlying collateral and adverse conditions specifically related to the security.

The estimates of fair values of debt securities and other financial instruments are based on a variety of factors.

In some cases, fair values represent quoted market prices for identical or comparable instruments.

In other cases, fair values have been estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of risk.

Accordingly, the fair values may not represent

actual values of the financial instruments that could have been realized as of year-end or that will be realized in the future.

other cases, fair values have been estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of risk.

Accordingly, the fair values may not represent actual

values of the financial instruments that could have been realized as of year-end or that will be realized in the future.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis